Melt the peanut butter and butter in a microwave safe dish. Microwave in 30 second intervals until butter is melted. Add the chocolate a little at a time until all is melted into the mix. You might need to microwave one last time to make sure everything is melted and add the vanilla. Stir together.
In a large bowl add half of the cereal.
Drizzle half of the chocolate peanut butter mixture into the cereal in the bowl. Mix with a spoon.
Place one large paper bag into another one. Add 1/2 cup of the powdered sugar and half of the mixed cereal into the bag. Close this tightly and shake vigorously. Add more powdered sugar 1/2 cup at a time if needed until all the cereal is coated. Add 1/4 of the m&ms into the bag and toss. Place in an air tight container.
Continue these step with the remaining ingredients.
Keep stored in an air tight container. I personally love to keep it in the freezer, YUM!